Building organizational resilience in volatile times

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Share this email Share this email on LinkedIn   Share this email on Twitter   Share this email on Facebook   OUR BEST IDEAS, QUICK AND CURATED | SEPTEMBER 23, 2022 View in browser   Edited by Barbara Tierney   Senior Editor, New York This week, we offer a strategic way forward for organizations beset by global challenges. Plus, a look at food loss through the journey of the humble tomato, and McKinsey partner Duwain Pinder on how to build racial and ethnic equity in US higher education. The decades-long orthodoxy of globalization is under strain as the world continues to face shocks: war, inflation, the long tail of the pandemic. According to a recent McKinsey survey of global economic conditions, CEOs continue to view geopolitical instability and supply chain disruptions as among the top threats to global growth. These challenges (and others yet unknown) may become more acute as the competition for global influence rises in the years ahead. An analytical approach. CEOs need to know whether they can still remain global players and, if so, how. One way to respond in the face of fragmentation and uncertainty is by intensifying focus on resilience. Of course, global executives have an intuitive sense of where to focus initially to build this skill into their organizations. Now, however, many are looking for a more rigorous and analytical approach. In a recent article, senior partner Andrew Grant and his colleagues focus on six dimensions where CEOs can challenge their organizations to build resilience: business model, reputation, organization, operations, technology, and finance. Concrete actions. In the case of business model resilience, they write that the board can take the lead in developing an understanding of geopolitical developments that are material to the organization. Boards can identify priority risks by creating a tiered approach, with tier five reflecting markets with the highest level of geopolitical risk and tier one denoting markets with localized risks that can be managed by local leadership and teams. A mechanism can be established for internal teams—legal, security, finance, risk, and communications—to assess the aggregate risk of operating in a particular market and offer options to recalibrate the organization's presence. Structural foundations. Companies may need to focus on building long-term resilience instead of day-to-day supply chain issues. Companies can construct a "digital twin" of the most critical parts of the supply chain and create and test what-if scenarios. It is also crucial to protect the physical security of one's people by maintaining redundancy in communication channels, aligning with security vendors on the ground, and keeping a low profile in high-risk markets. As future flash points arise, investing in early-warning systems and extraction plans is essential. The era of volatility. In conversations with McKinsey, CEOs, board members, and other business leaders share a common sentiment: today's combination of global shocks has created an extremely challenging environment for management teams. A resilience framework is a starting point for internal discussions on developing appropriate solutions. The new normal requires a new CEO mindset. That means making geopolitical resilience a strategic priority that will both protect the organization and lay the foundations for long-term competitive advantage. Off the charts Reducing food loss: A tomato's journey Most large-scale efforts to address the problem of food loss focus on food waste, largely because it's more visible: people see food being wasted in stores, restaurants, and households. But roughly half of the food that doesn't get eaten by humans—worth an estimated $600 billion—is lost at or near the farm, during or just after harvest. An examination of the farm-to-retailer food supply chain follows the journey of the humble (and ubiquitous) tomato as a way to consider how to reduce food loss. Check out our chart of the day here. PODCAST A North Star of the space economy Venture capitalist Mark Boggett is one of the most prolific investors in the vast region above the sky. In a recent interview, he offers an investor's view of the strides being made in space technology, its practical applications, and its potential benefits for individuals and societies. "We are focused on space looking down at Earth at the moment, because that's where we believe the largest opportunity is—taking this digital infrastructure and applying all of the data and connectivity to address many of the problems that we face on Earth," he says. More on McKinsey.com When good intentions get derailed | In this Bias Busters, we look at motivated reasoning—a cousin to the more well-known confirmation bias—which takes hold when people lend more credence to conclusions they want to be true rather than to those proved by evidence. Turning a talent challenge into a competitive advantage | Semiconductor companies are on the cusp of a decade of opportunity, but success will be predicated on the ability to attract and retain the best and brightest. How to rebuild social capital and improve corporate performance | People's professional networks have shrunk since the onset of the pandemic, while companies' hiring challenges are growing. To help reverse these trends, we look at how organizations can manage workplace interactions more intentionally. Four questions for Duwain Pinder Duwain Pinder, a partner in McKinsey's Ohio office, helps higher-education institutions and other organizations implement strategic and performance improvement strategies. He is also a leader of the McKinsey Institute for Black Economic Mobility, our global economic think tank focused on racial equity. Before coming to McKinsey, he was a director at Teach For America. You were an author of a recent report on racial and ethnic equity in US higher education. What did the research reveal? We learned that despite institutions' continuing efforts, historically marginalized racial and ethnic populations are still underrepresented in higher education among undergraduates and full-time faculty and in leadership. These findings are not novel, but what is significant is the slow rate of progress in driving inclusive growth. For Black and Native American students and for faculty from all underrepresented populations, there was effectively no progress from 2013 to 2020. The analysis suggests that higher education has opportunities to address these gaps. What are some of the key ways to make progress? Three focus areas are recruiting more first-time students from these populations, driving up completion rates, and creating a more diverse faculty. Several strategies can help. First, reflecting on an institution's role in these inequities can create an environment of intellectual and psychological honesty. After a comprehensive review, institutions can identify how processes, systems, and norms contribute to the marginalization of underrepresented racial and ethnic groups. For instance, universities could incorporate processes designed to boost racial equity in their administration of research and grant activities or implement strategies to reduce disparities in their local community. Institutions can then embed new racial-equity priorities into their culture. That involves incorporating equity as part of the strategic plan, dedicating sufficient resources to the effort, and assigning a senior leader and staff to support the president or chancellor in implementing ideas and tracking progress. Clear and frequent communication with stakeholders—including alumni, staff, and donors—at each stage of this work will ensure that people in every part of the institution and its extended community are progressing together toward a shared goal. You've done a lot of work with historically Black colleges and universities (HBCUs). How can their unique position help Black Americans make economic progress? In addition to their vital historical role, HBCUs today confer 17 percent of all bachelor's degrees awarded to Black students in the US (despite representing 3 percent of all colleges and universities). They've boosted their students into higher-income quintiles and into prominent political positions and remain key sources of talent. So these schools are playing a big role already, despite being significantly underfunded relative to non-HBCU peers. If funded more significantly and sustainably, HBCUs can do even more—like ensuring that their degree programs are preparing students for high-paying, in-demand careers and playing a greater role in reskilling and upskilling, especially as increases in automation create additional threats to Black employment. The US racial wealth gap is the product of several factors, including intergenerational transfers, lower incomes, and a lack of financial inclusion. Yet, our data show that a strong HBCU network could increase Black worker incomes by about $10 billion in addition to strengthening the economy with $1.2 billion in incremental business profit, $300 million in decreased student-loan debt, and $1 billion in additional consumer expenditures. In your role as a leader of the McKinsey Institute for Black Economic Mobility, what are you really excited about? McKinsey has the ability to help improve the lives and livelihoods of Black communities globally by sharing insights and coordinating actions toward inclusive growth. I'm excited about using the institute's platform to convene leaders and move them toward meaningful action. We held our fifth annual Black Economic Forum event in August, and it was so energizing to gather people from the worlds of business, government, and academia to talk about how to address racial inequalities and drive inclusive growth. We shared individual stories of Black economic mobility and discussed how to increase business diversity and support Black brands. I'm inspired by these conversations and believe leaders and organizations have a growing appetite for addressing these challenges. Share this Four Questions BACKTALK Have feedback or other ideas? We'd love to hear from you. 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